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DFA’s ETF Market Debut Is a Big Success

by Bernice Napach

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Better late than never could describe Dimensional Fund Advisors’ recent entrée into the ETF market.

The fund company’s first three ETFs have accumulated $700 million in assets since they launched in November and December, with almost half the growth occurring since Jan.1, 2021, according to Bloomberg News.

The three ETFs — Dimensional U.S. Core Equity Market ETF (DFAU), Dimensional International Markets Core ETF (DFAI) and Dimensional Emerging Core Equity Market ETF (DFAE) — have gained 5.7%, 4.5% and 10.4%, respectively, year-to-date. But only the U.S. Core Equity Market ETF, which has an expense ratio of 0.12%, outperformed its peers and benchmark index, according to Morningstar. DFAI charges 0.18% and DFAE 0.35%.

DFA has long been a favorite asset manager among financial advisors, distributing its mutual funds only to advisors, but it has been losing assets. Among the top 10 fund companies tracked by Morningstar, it experienced the largest outflows in 2020, losing $37 billion.

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By moving into ETFs, DFA has given access to all investors, not just the clients of financial advisors, to its funds, which use an asset management approach that has been described as a precursor to smart beta — favoring certain fundamental factors (dimensions) based on research by economist Eugene Fama and finance professor Kenneth French.

DFA’s Plans

In addition to the three new ETFs, DFA has plans to convert six equity mutual funds to ETFs later this year — ETFs that will cost investors 17% to 56% less in fees. The firm plans to cut the fees of 33 equity mutual funds by 15% later this month.

DFA “has come to market leveraging their scale and pricing these funds aggressively in an effort to appeal to the ETF community,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA. “We expect DFA to have continued success despite arriving very late to the ETF market.”

Bernice Napach

@Think_Napach